India’s finance ministry has just issued a notice warning citizens about the risks of investing in cryptocurrencies, including Bitcoin.

The Indian government has sounded the alarm on cryptocurrencies, especially Bitcoin, noting on Friday that they resemble Ponzi schemes.

“There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes, which can result in [a] sudden and prolonged crash exposing investors, especially retail consumers losing their hard-earned money. Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes,” India’s finance ministry said in its note.

The warning notice goes on to say that cryptocurrencies are not backed by government-issued fiat money so they cannot serve as legal tender. Despite being referred to as “coins,” virtual currencies do not have any physical attributes and cannot be considered coins either, the document says.

The finance ministry stressed that the Reserve Bank of India had not authorized cryptocurrencies as means of payment and the government has not issued any license via regulators to any crypto exchange. Crypto investors should be aware of this situation and act at their own risk.

The statement lists several cryptocurrency risks stemming from their digital nature.

“[Virtual currencies] are stored in digital/electronic format, making them vulnerable to hacking, loss of password, malware attack, etc., which may also result in permanent loss of money. As transactions of [virtual currencies] are encrypted, they are also likely being used to carry out illegal/subversive activities, such as terror-funding, smuggling, drug trafficking and other money-laundering acts.”

Pon Radhakrishnan, state finance minister in the Lower House of India’s Parliament, revealed earlier on Friday that the Department of Economic Affairs had set up a special committee to assess the current global regulatory framework for Bitcoin. The committee has already presented its report to the government.

In mid-November, we reported that India’s Supreme Court had urged the government to regulate Bitcoin and other cryptocurrencies.